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Tort/Negligence – Malicious Prosecution & Abuse of Process – Labor & Employment – Covenant Not to Compete

I-Minerals USA, Inc. v. Zielke (Lawyers Weekly No. 15-04-0898, 14 pp.) (Max Cogburn Jr., J.) 1:15-cv-00094; W.D.N.C.

Holding: In support of their malicious prosecution claim, plaintiffs allege that defendants in this case read a few sentences in a press release – announcing that defendants’ former employee, whose five-year covenant not to compete term had expired, was working with a new competitor – and, without conducting any inquiry whatsoever, filed suit and asserted nine counts against plaintiffs, alleging various types of misconduct relating to trade secrets. Plaintiffs have adequately alleged that defendants lacked probable cause to file suit against plaintiffs.

Defendants’ motion to dismiss is denied.

Where plaintiffs have alleged that (1) a temporary restraining order prevented plaintiff Gallo from working with plaintiff I-Minerals USA, Inc. during the pendency of the underlying action; (2) the TRO caused Gallo to have difficulty obtaining other employment in the metals industry; (3) the TRO interfered with the contract rights between I-Minerals and Gallo; and (4) the lawsuit generally required I-Minerals to hand over proprietary and trade secret information, plaintiffs have properly pled special damages in support of their malicious prosecution claim.

In support of their abuse of process claim, plaintiffs have alleged that defendants used the underlying action to stifle lawful competition, interfere with I-Minerals’ business relationships, and permanently restrain Gallo from working in the high purity quartz industry in any capacity. Plaintiffs have further alleged that, in the course of the litigation, defendants (1) sought injunctions to permanently sever the business relationship between I-Minerals and Gallo and to restrain Gallo from competing with plaintiff Unimin Corp. in any capacity; (2) sought expedited discovery from I-Minerals, including a specific demand for I-Minerals’ highly confidential proprietary and trade secret information, despite having no intention of providing any reciprocal discovery to I-Minerals; and (3) used the underlying action to attempt to leverage an agreement from Gallo tantamount to a lifetime non-compete agreement for work with quartz mining or processing. Such allegations plausibly allege willful acts whereby defendants sought to use the underlying proceeding to gain advantage over plaintiffs in respect to a collateral matter.

Although the Noerr-Pennington doctrine guarantees citizens their First Amendment right to petition the government for redress without fear of litigation, a party may nevertheless be held liable for bringing a sham lawsuit against a competitor if the lawsuit is objectively baseless. Plaintiffs’ allegations indicate that the underlying lawsuit was objectively baseless and otherwise constitutes a sham lawsuit. Furthermore, the Noerr-Pennington doctrine is an affirmative defense; given the pleadings in this case, it would be inappropriate to rule on it at this stage of the proceedings.

Motion denied.

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